Technical Analysis
Volume Analysis: Why Volume Confirms Price
High-volume breakouts are more reliable; volume divergence warns of false moves before they happen.
Key rules
- High volume on breakouts = institutional confirmation
- Low-volume breakouts are more likely to fail
- Volume should expand in the direction of the trend
- Climactic volume at trend extremes may signal exhaustion
- Use volume as confirmation, not standalone signal
Volume is the number of shares or contracts traded in a period. High volume on a breakout confirms institutional participation. Low-volume breakouts are prone to reversal — no real conviction behind the move.
Volume divergence — price rising on declining volume — warns of weakening trend strength. Climactic volume spikes at the end of trends often precede reversals.